Mortgage Strategies For Different Life Stages

As you grow in your career, the kids get older and your entertainment needs require more space

Borrowing funds to buy your first or second home, vacation home or to add to your investment portfolio requires different strategies. Often due to your age, personal income, and available cash flow, the mortgage that you use to purchase a home will vary. Younger buyers usually do not have the credit history of seasoned buyers and are not able to get as low an interest rate. The first-time homebuyer in their 20's or 30's has different requirements than someone who is downsizing and moving to a retirement community. Some things may be the same, but how you approach them and use the mortgage to your advantage can help you make the best moves toward using a loan to purchase real estate.

Getting Started and Starting Over

Some mortgage products help first-time homebuyers get into a house for no too little money down. The Federal Housing Authority (FHA), rural housing authority (USDA) and some local lenders offer conventional 15 to 30-year mortgages with fixed rates and down payments of 3.5 and 5 percent. One caveat of these mortgages is that the most of them require that you pay private mortgage insurance (PMI). PMI covers the lender in the event that you default on your loan and protects the lender, not you.

Trading Up

As you grow in your career, the kids get older and your entertainment needs require more space, selling your starter home and moving into a larger home can be financed with the funds of the sale of your first property. This may not require that you get a low to no money down mortgage if you have a twenty percent down payment for the home that you want. This will eliminate the PMI requirement so you can pocket the savings of that expense.

For those who have reached a point to trade up you may choose to buy outside of conforming loan price ranges. This amount is currently $417,000 in most states and $625,000 in some counties where home prices are much higher than the national average. At one time, Jumbo loans had interest rates that were much higher than conventional loans. However, since the 2007 - 2008 real estate meltdown, interest rates on Jumbo Loans are as low as or not lower than conforming loans. This is due to the strict standards and down payment requirements of these loans.

Trading Down

That large home may seem empty once the kids are gone and you may yearn for something smaller and easier to manage. Selling your home and buying a smaller home may not require the profits of the sale. This gives you investment options so that your money can work for you in the future.

Of course, you can buy a smaller home with the proceeds in a planned community. This will offer you amenities that can include, golf courses, tennis courts, fitness centers, and so on, or a mountain cabin, or condo at the beach. When you have money to invest, you have real estate purchase options and you have tax considerations.

Investing your Earnings

Another mortgage strategy can give you a home, and income property. This can be accomplished with a loan for a multi-family home and living in one unit while renting the other(s). This is one of the easiest ways to purchase an income-producing property. Mortgages for multi-family homes often require a ten percent down payment. It may not be the best purchase for many first-time homebuyers but is a great way to increase your wealth if you have the funds to buy this type of property.

Since living with renters may not be your cup of tea, buying single family or multi-family properties can give you income now and in the future. It is a good way to spend any extra income that you may have when trading down from your large home. It is also a way to invest the income so that you will get a monthly return on your investment. Mortgages for investment properties will require a twenty percent down payment and the mortgage expense, like other expenses on rental property, is tax deductible and can be used to offset other income.

Begin Planning your Mortgage Strategies Now

Whether you are a first-time homebuyer or looking for a retirement villa, there are mortgages available that will suit every life stage. Even those who have reached retirement age, and find themselves in a downside financial situation can find affordable loans with which to purchase a home.